Carletonville’s Gold Street: Where SA’s mining history goes to die a slow death

JOHANNESBURG — Watching South Africa’s gold mining industry shrink in significance has become a thing of tragedy. The country was once the biggest gold producer in the world until 2006, but now it’s down to about 7th with nations such as China and Australia taking the lead. It’s a tragic tale of boom and bust that is partly to blame on shrinking reserves, changes of metal demand in the market as well as policy missteps. What’s needed is for policymakers to help create an enabling environment for the likes of junior miners. But the policymakers who are in charge seem to have their eyes set on winning public opinion rather than industry gains, as witnessed with criticism around the latest mining charter. – Gareth van Zyl

That’s where Paseka Selemela has been guarding cars since 2010, when the scaffolding business he worked for closed. Prior to that, he was an assistant at a now-shuttered mine owned by AngloGold Ashanti Ltd. Nor has he found work in other gold mines around the town, home to the world’s deepest shafts. Many of his friends and family members have also joined the legions of the retrenched, including 8,500 people in the area last year alone.

“These people can’t find jobs, just like me,” Selemela, 34, said under the winter sun, wearing a torn, dirty Chelsea soccer club shirt and jeans that hung loosely on his thin frame. “They try at the retailers, but there is nothing available there. They are employing fewer people because people are buying less. There’s no money.”

Additional cuts are to come across mines and towns in South Africa, once the world’s biggest producer of gold. A volatile currency, uncertainty about regulations and demand, labor union tensions, harder-to-access ore, high operating costs and falling prices mean about half of gold and platinum operations are loss-making.

More than 6 million people are unemployed and looking for work, taking the jobless rate to about 28 percent, a 15-year high. This excludes 2.5 million discouraged job seekers.

He has his work cut out for him: The economy shrank the most in nine years in the first quarter, led by declines in agriculture, mining and manufacturing, Statistics South Africa said June 5. Gold production fell for the seventh straight month in April, the agency said on June 14.

Caldwell Nzimeni, a former engineering assistant at AngloGold Ashanti Ltd.’s Mponeng mine, poses for a photograph in Khutsong, Carletonville, South Africa, on Friday, May 25, 2018. More cuts are to come across mines and towns in South Africa, once the world’s biggest producer of gold and currently the largest of platinum. Photographer: Guillem Sartorio/Bloomberg

After gold was discovered near what was to become the economic hub of Johannesburg in 1886, the country became the biggest producer. The metal spawned some of the world’s largest mining companies, such as Anglo American Plc. It transformed South Africa from a farming economy into the continent’s most industrialised. It provided opportunities for unskilled black males, who were restricted from many jobs because of their race under white-minority-rule, known as apartheid.

In 1980, mining vied with manufacturing as the largest contributor to gross domestic product, with each at about 21 percent. Today, mines account for 7 percent of the economy. In 1987, the sector employed 763,000 people; that’s down more than 40 percent to 447,000 now. The government, retailers and banks are now the country’s biggest employers.

“A lot of the future of the industry is going to be based on constraining costs and a need to improve safety, but most particularly a focus on innovation and technology,” said Roger Baxter, chief executive officer of the Minerals Council of South Africa, which represents most producers. “It will continue to shrink until those initiatives start bearing good fruits.”

The newer platinum industry has its own problems. Producers are closing shafts and cutting thousands of jobs because a stronger rand and stagnating prices are squeezing profit margins. At the same time, reduced demand for diesel engines and the rise of electric cars threatens to erode the need for the metal, which is used in converters that control emissions in diesel-fueled vehicles. About 41 percent of platinum used last year was for this purpose, according to research from Johnson Matthey Plc, one of its top refiners.

“The industry is in crisis,” said Chris Griffith, CEO of Anglo American Platinum Ltd., the world’s largest producer. “It’s a chicken-and-egg situation. You need to invest yourself out of this situation by investing in growing demand.”

South Africa continues to be an important gold-mining jurisdiction worth investing in, said Bernard Swanepoel, a former CEO of Harmony Gold Mining Co. and board member of Impala Platinum Holdings Ltd., the world’s second-biggest producer.

“I really think it’s the last chapter, but the last chapter could be a good chapter,” he said. “Thirty more years of gold mining in South Africa could be a good chapter.”

And the country’s huge mineral endowment means chrome, iron ore and manganese – of which the nation has the world’s biggest known reserves – are becoming more important for exports, said Ross Harvey, a mining analyst at the South African Institute of International Affairs.

“Minerals such as iron ore have good prospects,” he said. “It’s an irreplaceable product for the steel industry. But as mines bring in new technology, that will continue to drive down jobs absorption.”

Mark Bohlund, an Africa economist at Bloomberg Economics, said the government should be doing more for an industry that’s still among the country’s top export-revenue earners.

Paseka Selemela, a former worker at the Savuka mine, guides cars into parking spaces in an area just off Gold Street in Carletonville, South Africa, on Friday, May 25, 2018. More cuts are to come across mines and towns in South Africa, once the world’s biggest producer of gold and currently the largest of platinum. Photographer: Guillem Sartorio/Bloomberg

“The government could offer more tax incentives for the mining sector but the scope for this will be constrained by the need to reduce the budget deficit and stabilise public debt,” he said. “Beyond that, the government needs to improve its relationship with key mining-sector unions and persuade them to moderate their wage demands.”

For Caldwell Nzimeni and his friends in Carletonville, working in a vehicle-assembly plant isn’t an option unless they migrate far from home and manage to acquire manufacturing skills they don’t have.

Nzimeni, 29, worked at Mponeng, the world’s deepest gold operation, for four years as an engineering assistant. He left in 2015 to complete his engineering studies but has been unsuccessfully applying for mine work for 18 months.

To make ends meet, he rents out shacks made from corrugated iron in the backyard of his home for R200 ($14) monthly and does plumbing and home-improvement jobs whenever he can find them. With the downturn in the town’s economy, his tenants are struggling to make their payments.

“I had hoped to return in a higher position with my qualification, but it hasn’t happened,” said Nzimeni, wearing blue work overalls and an old national soccer-team shirt sprayed with cement and grout after returning from an odd job installing a bathroom. “There are no jobs. Since the mines have closed, businesses are falling apart.”